SHRI CHAMPAKLAL NARAYANLAL PRAJAPATI,AHMEDABAD vs. THE ACIT, CENTRAL CIRCLE-2(3), AHMEDABAD

The assessee has taken the following grounds of appeal:

The brief facts of the case are that the assessee was subjected to search and seizure proceedings under section 132 of the Income-tax Act, 1961 ("the Act") on 02.02.2021 in connection with the search conducted in the case of the “Political Parties and Charitable Organisations (PPCO Group)”. The search covered several entities including certain political parties and charitable organizations such as Manavadhikar National Party, Kisan Adhikar Party, Kisan Party of India, All India Social Education Charitable

During the assessment proceedings conducted under section 153A/153C read with section 143(3) of the Act, the Assessing Officer examined the seized material and statements recorded during search proceedings. In his statement recorded under section 132(4) of the Act, the assessee admitted that he was involved in facilitating bogus donation transactions and that he earned commission income from such activities. The assessee admitted that he generally charged commission at the rate of approximately 0.20% of the total amount involved in such accommodation entry transactions. Based on the incriminating material seized and the statements of other persons involved in the scheme, including that of Shri Saumil Bhadiadra who was alleged to be the main operator of the network, the Assessing Officer noted that the assessee had facilitated bogus donations aggregating to ₹1,64,74,63,614/- during the relevant period. Applying the admitted commission rate of 0.20%, the Assessing Officer computed the commission income attributable to the assessee at

Apart from the above addition, the Assessing Officer also examined the issue relating to bogus billing accommodation entries. During the search, documents relating to bogus invoices amounting to ₹11,57,11,453/- were found and seized. Based on the seized documents and statements recorded during the course of search proceedings, the Assessing Officer held that the assessee had facilitated bogus billing accommodation entries and earned commission income therefrom. The Assessing Officer estimated the commission income at 0.25% of the total bogus billing transactions and accordingly made an addition of ₹2,89,278/- on account of such commission income.

Further, during the course of search proceedings, cash amounting to ₹1,12,50,000/- was found from the residential premises of the assessee and cash of ₹29,41,710/- was found from his business premises. The Assessing Officer examined the explanation offered by the assessee regarding the source of the said cash. In his statement recorded during the search, the assessee had stated that the cash belonged to the operators of the accommodation entry network and was withdrawn from bank accounts after routing bogus donations and was to be delivered to beneficiaries. However, during the course of assessment proceedings, the assessee changed his explanation and contended that the cash represented cash balances as per books of account and also included amounts belonging to various family members. The Assessing Officer observed that the explanation offered during assessment proceedings was contradictory to the statement

Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(Appeals) raising several legal as well as factual grounds.

At the outset, the assessee challenged the validity of the assessment proceedings by raising legal grounds alleging that the assessment orders were passed without proper approval under section 153D of the Act. The assessee contended that the approval granted by the Joint Commissioner of Income Tax was mechanical and without application of mind as the approving authority had allegedly granted approval in more than 80 cases on the last day of limitation i.e. 31.03.2022. The assessee argued that it was humanly impossible for the approving authority to examine voluminous records and seized material in such a large number of cases in a single day. The assessee further contended that the assessment orders were manually signed and uploaded on the ITBA portal after considerable delay, which according to the assessee was in violation of CBDT Circular No.19/2019 dated 14.08.2019 relating to mandatory generation of Document Identification Number (DIN) for all communications.

The CIT(Appeals), after considering the submissions of the assessee and the remand report of the Assessing Officer, rejected these legal challenges. The CIT(Appeals) observed that in search cases the issues involved are generally common across group entities and are discussed in detail between the Assessing Officer and the Range Head during the course of assessment proceedings. The CIT(Appeals) noted that the appraisal report,

The CIT(Appeals) then proceeded to adjudicate the grounds relating to addition of ₹23,44,898/- on account of undisclosed commission income. The assessee contended that the addition was made without any incriminating material and was based solely on the statement of a third party namely Shri Saumil Bhadiadra without granting opportunity for cross-examination. The assessee also argued that the addition was based on rough calculations in excel sheets and that the Assessing Officer had wrongly estimated the volume of transactions attributable to the assessee.

The CIT(Appeals), however, rejected the contentions of the assessee and upheld the addition made by the Assessing Officer. The CIT(Appeals) observed that the assessee had himself admitted in his statement recorded during search that he was engaged in facilitating bogus donation transactions and that he earned commission income from such activities. The CIT(Appeals) further noted that the seized documents and excel sheets found from the premises of Shri Saumil Bhadiadra clearly established that the

With respect to the addition of ₹2,89,278/- on account of commission earned from bogus billing accommodation entries, the CIT(Appeals) examined the seized documents and statements recorded during search proceedings. The CIT(Appeals) observed that the bogus invoices were found from the possession of the father of the assessee and that the father had admitted facilitating such transactions. Accordingly, the CIT(Appeals) held that the substantive addition on account of such commission income should be made in the hands of the father and not in the hands of the assessee. The CIT(Appeals), however, upheld the commission rate of 0.25% adopted by the Assessing Officer in respect of such transactions and directed deletion of the addition from the hands of the assessee.

The CIT(Appeals) then dealt with the addition of ₹1,43,41,710/- on account of unexplained cash found during the course of search. The assessee contended that the cash found during search was recorded in the books of account and also included cash belonging to various family members. The

However, the CIT(Appeals) granted partial relief to the assessee by allowing telescoping benefit in respect of the commission income already brought to tax. Accordingly, the CIT(Appeals) directed the Assessing Officer to grant telescoping benefit of ₹32,94,927/- representing undisclosed commission income while computing the addition on account of unexplained cash. After granting such relief, the CIT(Appeals) confirmed the addition of ₹1,10,46,783/- as unexplained cash under section 69A read with section 115BBE of the Act.

The CIT(Appeals) also rejected the contention of the assessee that the cash found during search should be treated as business income and should not be taxed under section 115BBE of the Act. The CIT(Appeals) held that the assessee failed to explain the exact nature and source of the cash found during search and therefore the Assessing Officer was justified in invoking section 115BBE.

The CIT(Appeals) further rejected the ground raised by the assessee alleging violation of section 144C of the Act by observing that the provisions of section 144C apply only to “eligible assessees” such as foreign companies or cases involving transfer pricing adjustments. Since the assessee did not fall within the definition of an eligible assessee, the CIT(Appeals) held that the provisions of section 144C were not applicable.

In the result, the CIT(Appeals) partly allowed the appeal by granting limited relief in respect of the bogus billing commission addition and telescoping benefit while confirming the major additions relating to undisclosed commission income and unexplained cash found during search.

The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.

We have heard the rival contentions and perused the material on record.

Before us, the ld. counsel for the assessee reiterated the arguments taken before the CIT(Appeals) that the amount of 87.87 lakhs belonged to the family members and drew our attention to the relevant pages of Paper-Book. The ld. counsel for the assessee also reiterated the argument with respect to grant of mechanical approval.

We have heard the rival contentions and perused the material available on record. The assessee has primarily challenged the order of the learned CIT(Appeals) on two principal grounds, namely (i) that the approval granted under section 153D of the Act was mechanical in nature and therefore the assessment order is liable to be quashed, and (ii) that the cash found during the course of search belonged to the family members and therefore the

At the outset, we shall deal with the legal challenge raised by the assessee with respect to the alleged mechanical approval granted under section 153D of the Act. The assessee has contended that the approval granted by the Joint Commissioner of Income Tax on the last date of limitation was mechanical and without application of mind and therefore the entire assessment proceedings are vitiated. However, we find no merit in the above contention of the assessee. The issue relating to alleged mechanical approval under section 153D of the Act has been elaborately considered by the Coordinate Bench of the Tribunal in the case of Smt. Neelu Sanjay Gupta (L/H of Late Shri Sanjay Gupta) vs. DCIT, Central Circle-2(2), Ahmedabad and connected appeals in the case of M/s Technodot Engineers Ltd., IT(SS)A Nos.147 & 148/Ahd/2019, IT(SS)A Nos.21 to 23/Ahd/2020, ITA No.93/Ahd/2020 and ITA No.15/Ahd/2022, order dated 26.11.2024 (Ahmedabad Bench). In the said decision, the Tribunal, after examining the entire procedure relating to search assessments including the guidelines governing search and seizure assessments, held that the approval granted by the Joint Commissioner cannot be treated as mechanical merely because it was granted on the same day when the draft assessment orders were submitted for approval. The Tribunal observed that in search cases the approving authority is aware of the facts of the case from the stage of search itself and is involved in the assessment process through examination of the appraisal report, seized material and action notes prepared during the course of proceedings. It was further held that where the draft assessment orders along with the case records are placed before the approving authority

We shall now deal with the addition sustained by the learned CIT(Appeals) on account of unexplained cash found during the course of search. The assessee has contended before us that a substantial portion of the cash found during the course of search belonged to the family members and therefore the same could not have been treated as unexplained income in the hands of the assessee. However, we find that the learned CIT(Appeals) has examined this contention in detail and has recorded a categorical finding that the explanation offered by the assessee regarding ownership of the cash by family members was contrary to the statement recorded during the course of search and was clearly an afterthought. The learned CIT(Appeals) has also observed that at the time of recording the statement under section 132(4) of the Act the assessee had categorically admitted that the cash belonged to the operators of the accommodation entry network and was withdrawn from bank accounts after routing bogus donations and was to be delivered to beneficiaries. It is also a matter of record that the assessee did not retract the statement recorded during the course of search and no evidence was produced to substantiate the claim that the cash belonged to the family

Further, from the material on record it is evident that the assessee himself admitted that he was acting as a cash handler in the accommodation entry racket involving bogus donations routed through political parties and charitable entities. Once the assessee has admitted that he was actively involved in handling cash relating to such accommodation entry transactions, the explanation that the cash found during the course of search belonged to the family members becomes implausible and devoid of credibility. The learned CIT(Appeals) has therefore rightly held that the cash found during the course of search represents unexplained money in the hands of the assessee. We find no infirmity in the above findings of the learned CIT(Appeals).

The assessee has also argued that the cash found during search should be treated as business income and not as unexplained income taxable under section 69A read with section 115BBE of the Act. We are unable to accept the above contention. The provisions of section 69A of the Act clearly provide that where any money is found in the possession of the assessee and

We also find that the learned CIT(Appeals) has already granted substantial relief to the assessee by allowing telescoping benefit of undisclosed commission income while computing the addition on account of unexplained cash. After granting such benefit, the learned CIT(Appeals) has confirmed the addition only to the extent of the unexplained balance amount. The findings recorded by the learned CIT(Appeals) are based on detailed

It is also clarified that the grounds raised by the assessee have been adjudicated on the basis of the detailed arguments advanced during the course of appellate proceedings before this Tribunal and any other incidental or general grounds which were not specifically argued before us have not been separately dealt with.

In view of the above discussion and respectfully following the judicial precedents referred to hereinabove, we find no infirmity in the order passed by the learned CIT(Appeals).

Accordingly, the appeal filed by the assessee is dismissed. This Order is pronounced in the Open Court on 12/03/2026